City appealing judge's ruling in excise tax lawsuit
Jul. 15—The complex legal battle over a controversial tax on high-end homes isn't done.
Not even close.
The city of Santa Fe is appealing a May ruling that declared the voter-approved tax on home sales of more than $1 million unlawful.
The city filed a notice of appeal in late June, about a month after District Judge Bryan Biedscheid decided during a hearing the tax, overwhelmingly supported by voters last fall, could not take effect.
"I am looking forward to how this proceeds," Councilor Jamie Cassutt said in a recent interview.
Cassutt and former City Councilor Renee Villarreal were the sponsors of the original ordinance establishing the levy, which would impose a 3% tax on the value of home sales within the city above $1 million. Money from the tax, which supporters estimated could generate as much as $6 million a year, would go to the city's Affordable Housing Trust Fund.
The ordinance was supported by 73% of voters in last year's election but challenged in court by the Santa Fe Association of Realtors and two individual plaintiffs. They argued the tax was on real property; under state law, municipalities do not have the authority to levy taxes on such items.
Biedscheid ultimately agreed.
"By taxing or basing a tax on the full amount of a purchase price, the city would be imposing its excise tax not just on services but also on the real property that is part of the transaction," he said at the May 22 hearing.
Cassutt noted this is the first time this type of tax was being considered in New Mexico, and there was not existing case law from which to draw.
"There's not really a precedent set," she said.
Cassutt said she believes it's important for the city to fully pursue its legal options before going back to the drawing board on how to generate revenue for the Affordable Housing Trust Fund.
The lawsuit was discussed in closed session during the City Council's May 29 meeting but City Attorney Erin McSherry wrote in an email the council did not need to take a vote on whether to appeal.
"We determined that was not the case to continue to defend a law the [Governing Body] adopted and that the voters approved," she wrote.
McSherry wrote the next step for the city is to file a docketing statement within 30 days of the notice of appeal.
The primary attorney representing the city in the legal challenge was Senior Assistant City Attorney Marcos Martinez. It's unclear whether outside counsel will be brought on for the appeal.
"I have contracted with counsel who may assist in any tax matters, including this case," McSherry wrote in a text message.
